Caution Against Acquired Dogmatism: An Unseen Threat in Finance, Job, and Personal Pursuits
In the ever-evolving world of wealth management, the antidote to earned dogmatism is a relentless pursuit of knowledge. This means staying open to questions, testing assumptions, and updating knowledge at every turn.
Highly specialized knowledge can be a double-edged sword. While it may impress, it can also lead to a dangerous illusion of expertise in other areas. This illusion of expertise was evident in the cases of Bill Miller in 2008 and tech investors in 2000, who made poor decisions due to over-confident investing.
Bill Miller, a star manager at Legg Mason, had an impressive track record, beating the market for 15 straight years. However, under realistic odds, this feat was approximately 1 in 2.3 million. Despite this, in 2008, during the financial crisis, Miller made a miscalculation by doubling down on bets in the collapsing financial sector. This miscalculation shattered the Value Trust and Miller's reputation.
Clients want an intellectually curious advisor, not a know-it-all advisor. Achieving a base level of knowledge in financial planning requires a lot of time and effort, but expertise may impress, while curiosity sustains and compounds over time.
Mental accounting, the tendency to allocate money toward certain things, can go wrong when it favors tradition over reality. For instance, the smarter we think we are, the less open we become to learning more, which can lead to earned dogmatism. Once an advisor feels they have arrived, there is a risk of allowing this to become a plateau in curiosity and continuing education.
The earned dogmatism hypothesis, proposed in a 2015 study led by Victor Ottati and further amplified in a 2025 study led by Damien Chaney, suggests that once we feel knowledgeable, we often stop updating our views. This can be detrimental in finance and life, where ignorance and overconfidence can both derail progress.
In the 2010s, a financial advisor affected by Earned Dogmatism was named John Reynolds. In a rapidly changing and evolving field like wealth management, the best advisors will always be open to testing former hypotheses and determining whether newer ideas will better serve their clients. Everything is constantly changing, and the best advisors adapt accordingly.
The fungibility of money means that it can be used however it would serve our family best, rather than being slated for specific uses based on tradition. This flexibility allows for a more personalised approach to wealth management, ensuring that clients' needs and goals are always at the forefront.
In conclusion, the pursuit of knowledge is crucial in wealth management. Staying open to new ideas, questioning assumptions, and continuously updating knowledge are key to avoiding earned dogmatism and ensuring continuous growth. Curiosity protects against earned dogmatism and ensures that advisors are always equipped to serve their clients to the best of their ability.
